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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
July 2012:
Conflict Minerals Disclosure Rule:
SEC's Actions and Stakeholder-Developed Initiatives:
GAO-12-763:
GAO Highlights:
Highlights of GAO-12-763, a report to congressional committees.
Why GAO Did This Study:
In eastern DRC, armed groups continue to commit severe human rights
abuses and profit from exploitation of minerals and other trades. In
2010, Congress included a provision in the Dodd-Frank Wall Street
Reform and Consumer Protection Act to address the trade of conflict
minerals—tin, tantalum, tungsten, and gold. Section 1502(b) of the act
requires SEC to issue a disclosure rule for companies using these
minerals in their products. The act also requires GAO to assess the rule
’s effectiveness and the rate of sexual violence in war-torn areas of
DRC and neighboring countries.
Since a rule has not been issued, this report examines (1) steps SEC
has taken toward issuing a conflict minerals disclosure rule; and (2)
stakeholder-developed initiatives that may help covered companies
comply with the anticipated rule. This report also examines (3) any
additional information available on the rate of sexual violence in
eastern DRC and neighboring countries since GAO’s 2011 report on that
subject.
GAO reviewed and analyzed reports and documents from SEC, other U.S.
agencies, industry associations and other nongovernmental
stakeholders; and interviewed representatives from those organizations.
What GAO Found:
What GAO Found
The Securities and Exchange Commission (SEC) has taken some steps
toward developing a conflict minerals disclosure rule, but it has not
issued a final rule. For example, SEC published a proposed rule in
December 2010 and has gathered and reviewed extensive input from
external stakeholders through comment letters and meetings. SEC has
also announced, on several occasions, new target dates for the
publication of a final rule, as shown in the table below. In July
2012, SEC announced that the Commission will hold an open meeting in
August 2012 to consider whether to adopt a final rule. According to
SEC officials, various factors have caused delays in finalizing the
rule beyond the April 2011 deadline stipulated in the act, including
the intensity of input from stakeholders and the public; the amount of
time required to review this input; and the need to conduct a thorough
economic analysis for rule making.
Table: SEC Announcements of Target Publication Dates for Final
Conflict Minerals Disclosure Rule:
Date of announcement: April 2011;
New target date for publication of final rule: August 2011-December
2011.
Date of announcement: November 2011;
New target date for publication of final rule: November 2011-December
2011.
Date of announcement: Mid-December 2011;
New target date for publication of final rule: December 2011.
Date of announcement: End of December 2011;
New target date for publication of final rule: January 2012-June 2012.
Source: SEC.
[End of table]
Various stakeholders have developed initiatives that may help covered
companies comply with the anticipated rule, but some initiatives have
been hindered by SEC’s delay in issuing a final rule. Industry
associations, multilateral organizations, and other stakeholders have
developed global and in-region sourcing initiatives, which include the
development of guidance documents, audit protocols, and in-region
sourcing systems. These initiatives may support companies’ efforts to
conduct due diligence and to identify and responsibly source conflict
minerals. In the absence of SEC’s final rule, however, stakeholders
note that uncertainty regarding SEC’s reporting and due diligence
requirements has complicated their efforts to expand and harmonize
their initiatives. For example, in the absence of a final rule, one
initiative is facing difficulty engaging additional participants,
while stakeholders’ efforts to harmonize two initiatives have been
hindered.
Little additional information on the rate of sexual violence in
eastern Democratic Republic of the Congo (DRC) and neighboring
countries has become available since GAO’s 2011 report on that
subject. For example, only one population-based survey has been
published on sexual violence in Rwanda, and it reports that 22 percent
of women ages 15-49 have experienced sexual violence there in their
lifetimes. No additional surveys have been conducted in eastern DRC;
however, one organization is currently conducting a survey and another
is planning to conduct a survey there in 2012.
What GAO Recommends:
GAO recommends that the Chairman of SEC identify remaining steps and
associated time frames to issue a final rule. SEC neither agreed nor
disagreed with the recommendation, but noted that it will expedite the
completion of its rule making to provide certainty.
View [hyperlink, http://www.gao.gov/products/GAO-12-763]. For more
information, contact Michael J. Courts at (202) 512-8980 or
courtsm@gao.gov.
[End of section]
Contents:
Letter:
Background:
SEC Has Taken Some Steps toward Developing a Rule but Has Delayed
Issuing a Final Rule:
Stakeholder-Developed Initiatives May Facilitate Compliance with the
Anticipated Rule, but Efforts to Improve Some Initiatives Have Been
Hindered by the Absence of a Final Rule:
Little Additional Information on the Rate of Sexual Violence in
Eastern DRC and Neighboring Countries Has Become Available since GAO's
2011 Report:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Descriptions of Global and In-Region Sourcing Initiatives:
Appendix III: Comments from the Securities and Exchange Commission:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: SEC Announcements of Target Publication Dates for Final
Disclosure Rule:
Table 2: Stakeholder-Developed Global and In-Region Sourcing
Initiatives:
Table 3: Population-Based Surveys That Estimate the Rate of Sexual
Violence in Rwanda, Eastern DRC, and Uganda:
Figures:
Figure 1: The DRC, including Eastern DRC (North and South Kivu
Provinces and the Ituri District of Orientale Province), and Adjoining
Countries:
Figure 2: Simplified Conflict Minerals Supply Chain:
Figure 3: Artisanal Gold Mining Site in Eastern DRC:
Figure 4: Timeline of Steps SEC Has Taken toward Developing a Rule:
Figure 5: Segments of Conflict Minerals Supply Chains Supported by
Stakeholder-Developed Initiatives:
Figure 6: A Processing Machine in a Certified Conflict-Free Tantalum
Smelting Facility:
Figure 7: Gold Bars Produced by LBMA Accredited Refiners:
Figure 8: Artisanal Miners Panning Tin Ore at a Rwandan Mine Site:
Abbreviations:
BGR: German Federal Institute for Geosciences and Natural Resources:
DHS: Demographic and Health Survey:
DRC: Democratic Republic of the Congo:
EICC: Electronic Industry Citizenship Coalition:
G-8: Group of 8:
GeSI: Global e-Sustainability Initiative:
ICGLR: International Conference on the Great Lakes Region:
iTSCi: ITRI Tin Supply Chain Initiative:
LBMA: London Bullion Market Association:
MONUSCO: United Nations Organization Stabilization Mission in the
Democratic Republic of the Congo:
NGO: nongovernmental organization:
OECD: Organisation for Economic Co-operation and Development:
PPA: Public-Private Alliance for Responsible Minerals Trade:
RJC: Responsible Jewellery Council:
SEC: Securities and Exchange Commission:
UNSC: United Nations Security Council:
UNGoE: United Nations Group of Experts:
USAID: United States Agency for International Development:
WGC: World Gold Council:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
July 16, 2012:
Congressional Committees:
The eastern portion of the Democratic Republic of the Congo (DRC) has
long been the site of one of the world’s worst humanitarian crises,
and violence there continues. Large numbers of civilians in war-torn
areas of the DRC have been the victims of horrific sexual violence,
including rape, mutilation, and sexual slavery carried out by armed
groups. In addition, as we previously reported,[Footnote 1] illegal
armed groups, as well as some units of the Congolese national
military, have continued to commit severe human rights abuses,
including mass killings. The illegal armed groups and units of the
Congolese national military committing these atrocities also profit
from the illegal mining of minerals and the illicit taxation of other
trades, such as charcoal and timber. Citing the continuing urgency of
the human rights situation and the need to take action, in July 2010,
Congress included in the Dodd-Frank Wall Street Reform and Consumer
Protection Act (hereafter in this report referred to as the Dodd-Frank
Act, or the Act) provisions pertaining to the trade of conflict
minerals. The Act defines conflict minerals as columbite-tantalite
(coltan), cassiterite, wolframite, and gold ores, or their
derivatives.[Footnote 2] When these ores are processed they yield the
following metals used in industrial and other applications: tantalum,
tin, tungsten, and gold, respectively. Hereafter in this report, the
term “conflict minerals” will refer to either these ores or these
metals. Section 1502(b) of the Act requires the Securities and
Exchange Commission (SEC) to issue a conflict minerals disclosure rule
(hereafter referred to as a rule) for “persons”[Footnote 3] (hereafter
referred to as covered companies) that must file reports with SEC to
disclose whether necessary conflict minerals used in their products
originated in the DRC or in an adjoining country and, if they did, to
provide an additional report with certain disclosures.[Footnotes 4,5]
The Act also requires us to report on the effectiveness of SEC’s rule
and on the rate of sexual violence in war-torn areas of the DRC and
adjoining countries. We issued our first report on sexual violence in
these areas in July 2011.[Footnote 6]
This report examines (1) steps SEC has taken toward issuing a conflict
minerals disclosure rule; (2) stakeholder-developed initiatives that
may help covered companies comply with the anticipated rule; and (3)
any additional[Footnote 3] information available on the rate of sexual
violence in eastern DRC and neighboring countries since our 2011
report.[Footnotes 7,8]
To address the first two objectives, we reviewed and analyzed the
provisions of the Securities Exchange Act of 1934 as added by section
1502(b) of the Dodd-Frank Act; documents, comment letters, and memos--
including SEC's proposed rule--from SEC; documents and reports from
the Department of State (State) and the United States Agency for
International Development (USAID); as well as documents and reports
from multilateral organizations such as the Organisation for Economic
Co-operation and Development (OECD), nongovernmental organizations
(NGOs), and industry associations. We interviewed officials from
relevant U.S. agencies, as well as representatives from multilateral
organizations--including the International Conference on the Great
Lakes Region (ICGLR), NGOs, consulting firms, industry associations,
companies--including five smelters and one refiner encompassing all
four minerals--and a gold industry expert. We traveled to the United
Kingdom, France, Belgium, and Germany to interview representatives
from the OECD Secretariat, foreign government officials, and
representatives from foreign companies--including smelters, industry
associations, and consulting firms. To address the third objective, we
conducted interviews with representatives from State, USAID, the
Department of Defense, relevant NGOs, and researchers, and gathered
and analyzed relevant documents from these organizations, to determine
if any new data on sexual violence were available. We also conducted
Internet literature searches to identify new academic articles
containing any additional data. See appendix I for a complete
description of our scope and methodology.
We conducted this performance audit from August 2011 to July 2012 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
History of the DRC: War and Instability:
The DRC is a vast, mineral-rich nation with an estimated population of
approximately 72 million to 74 million people in an area that is
roughly one-quarter the size of the United States.[Footnote 9] It was
colonized in 1885 as a personal possession of Belgian King Leopold II
and administered by the Belgian government starting in 1907. It
achieved independence from Belgium in 1960. For almost 30 years of the
postindependence period, the DRC was known as Zaire and was ruled by
an authoritarian regime under Mobutu Sese Seko. Following the 1994
genocide in Rwanda, some perpetrators of the genocide and refugees
fled into eastern DRC. See figure 1 for a map of the DRC and adjoining
countries.
Figure 1: The DRC, including Eastern DRC (North and South Kivu
Provinces and the Ituri District of Orientale Province), and Adjoining
Countries:
[Refer to PDF for image: illustrated map]
Source: Map REsources (map).
[End of figure]
The Mobutu regime was toppled in 1997 by Laurent Kabila, who led a
rebel group from eastern DRC with the assistance of Rwanda and Uganda.
Kabila was assassinated in 2001 and leadership shifted to his son,
Joseph Kabila. During the period of the senior Kabila's regime, the
nation experienced a period of civil war during which numerous rebel
groups, with the assistance of Rwanda, Uganda, and other neighboring
countries, captured significant parts of the DRC. The war continued
into the regime of Joseph Kabila, and resulted in the deaths of an
estimated 5.4 million people by 2007.[Footnote 10] As we reported in
2010, illegal armed groups and some Congolese national military units
are consistently and directly involved in human rights abuses against
the civilian population in eastern DRC and are involved in the
exploitation of conflict minerals and other trades. We also reported
that there is a culture of impunity in eastern DRC in which those who
have committed human rights abuses do not face justice for the crimes
they have committed. After decades of instability and war, the central
government in the capital, Kinshasa, currently has little
administrative capacity and control over remote regions, including
eastern DRC. The long distances between the capital and eastern DRC
and the rudimentary infrastructure, which make transportation and
communication difficult, further limit the central government's
control in eastern DRC.
U.S. Government Response:
In 2006, Congress passed the Democratic Republic of Congo Relief,
Security, and Democracy Promotion Act of 2006.[Footnote 11] The act
stated that it is the policy of the United States to engage with
governments working for peace and security throughout the DRC and hold
accountable individuals, entities, and countries working to
destabilize the country. According to State officials, improving
security in the eastern portion of the DRC is central to U.S. efforts.
In August 2009, the Secretary of State traveled to the eastern portion
of the DRC where, after seeing the consequences of the conflict
firsthand, she called for action to assist victims of sexual violence.
Recognizing that the exploitation and trade of conflict minerals
originating in the DRC is helping to finance conflict, in July 2010
Congress included a provision in section 1502(b) of the Dodd-Frank Act
that requires SEC to issue a rule for covered companies to disclose
whether necessary conflict minerals used in their products originated
in the DRC or in an adjoining country and, if they did, to provide an
additional report with certain disclosures.[Footnote 12] The United
States is the largest donor to the United Nations Organization
Stabilization Mission in the Democratic Republic of the Congo
(MONUSCO), [Footnote 13] contributing almost one-third of MONUSCO's $1
billion annual budget. Furthermore, in November 2011, State and USAID,
in collaboration with NGOs, industry, and other governments, launched
the Public-Private Alliance for Responsible Minerals Trade (PPA) to
support supply chain solutions to conflict minerals challenges in the
DRC and neighboring countries.[Footnote 14]
Minerals Covered by the Conflict Minerals Legislation: Origins, Uses,
and Supply Chains:
The four conflict minerals covered by section 1502(b) of the Dodd-
Frank Act are mined in various locations around the world; for
example, tin is mined in China, Indonesia, Peru, Bolivia, as well as
the DRC. Similarly, tantalum is reportedly mined in areas such as
Australia, Brazil, Canada, and the DRC. While the majority of
tungsten--reportedly 77 to 84 percent of global production from 2006
through 2009--is mined in China and a very small amount is mined in
the DRC, gold is mined in many different countries, including the DRC.
Our review of United States Geological Survey data on tantalum, tin,
tungsten, and gold mined in the DRC showed that about 17 percent of
the global tantalum supply, about 4 percent of the global tin supply,
less than 1 percent of the global tungsten supply, and less than 1
percent of the global gold supply, was mined in the DRC in 2009.
[Footnote 15] However, according to a December 2011 report by the
United Nations Group of Experts on the DRC (UNGoE),[Footnote 16]
mineral production and exports from eastern DRC have recently fallen.
[Footnote 17]
Various industries, in particular manufacturing, use these minerals in
a wide variety of products and in varying amounts. Tin is utilized by
a multitude of industries in tin solder, which is used to join metal
pieces together.[Footnote 18] According to company representatives,
tin is also found in food packaging, in steel coatings on automobile
parts, and in some plastics. According to industry association and
company representatives, the majority of tantalum is used to
manufacture tantalum capacitors, which enable energy storage in
electronics products such as cell phones and computers.[Footnote 19]
Tungsten is used in drill bits and cutting tools and other industrial
manufacturing tools; it is also the primary component of filaments in
light bulbs. In addition to its use as currency and in jewelry, gold
is also used by other industries, such as the electronics industry.
Figure 2 below depicts a simplified conflict minerals supply chain for
all four conflict minerals. For the purposes of this report, it
provides a basic overview of how conflict minerals move from the mine
of origin to the end consumer.[Footnote 20]
Figure 2: Simplified Conflict Minerals Supply Chain:
[Refer to PDF for image: illustration]
Mineral ores to Processed metals and products to Consumers:
Mines:
Local processors/traders;
Exporters;
Smelters/refiners;
Banks/exchanges/traders;
Component part manufacturers;
Original equipment manufacturers;
Consumers.
Source: GAO analysis.
[End of figure]
At mines throughout the world, mineral ores are extracted using
mechanized industrial or artisanal mining techniques.[Footnote 21]
While industrial mining occurs in some provinces in the DRC, such as
the Katanga province, artisanal mining is the dominant type of mining
used in eastern DRC where conflict is most prevalent.[Footnote 22] See
figure 3 for a picture of an artisanal mining site in eastern DRC.
Figure 3: Artisanal Gold Mining Site in Eastern DRC:
[Refer to PDF for image: photograph]
Source: Pact.
[End of figure]
For artisanal mining, the local processor or trader--an individual or
company--purchases minerals directly from mine sites and typically
processes or upgrades the material before selling it to the exporter,
but the exporter may also purchase minerals directly from mine sites
rather than going through a local processor or trader. Also, exporters
may carry out further processing or upgrading before exporting the
materials to a smelter or refiner. At the most basic level, smelting
involves converting a mineral into a metal and refining involves
purifying a metal into a higher-purity metal.[Footnote 23] Although
some smelters of tin, tantalum, and tungsten sell high-purity metals
through traders or exchanges, smelters primarily sell high-purity tin,
tantalum, and tungsten directly to component parts manufacturers.
Component parts manufacturers construct individual parts--such as
capacitors, engine parts, clasps for necklaces, and other items--that
they sell to original equipment manufacturers. Original equipment
manufacturers complete the final assembly of a product and sell their
products to consumers.[Footnote 24],[Footnote 25]
The supply chain for industrially mined gold, which is the dominant
form of mining conducted outside of eastern DRC, is different.
Industrially mined gold is typically shipped from mine sites directly
to refiners, bypassing local traders and exporters. Gold refiners
typically sell high-purity gold to banks, for use as a store of value,
or to international exchanges and traders, where gold is bought and
sold. Banks and traders may sell gold to manufacturers, including
jewelry or electronics component parts manufacturers and some gold
refiners sell gold directly to manufacturers.
According to industry association and company representatives, in
practice, a company's supply chain for products containing tin,
tantalum, tungsten, and gold can be complex and can vary considerably.
For example, a company's conflict minerals supply chains may involve
several different entities taking different actions to help develop
products and move them through the supply chain. In addition, the
supply chains for some companies' products may contain a small number
of component parts, whereas the supply chains for other companies'
products may contain thousands of component parts, which may be
sourced from hundreds of different suppliers.
SEC Has Taken Some Steps toward Developing a Rule but Has Delayed
Issuing a Final Rule:
SEC has published a proposed conflict minerals disclosure rule and has
taken steps to gather input from various stakeholders. However, it has
delayed issuing a final rule due to a number of factors, such as
addressing intense stakeholder input and dealing with a heavy rule-
making workload.
SEC Has Published a Proposed Rule and Gathered Stakeholder Input:
SEC did not meet the deadline in the Dodd-Frank Act to issue a final
conflict minerals disclosure rule by April 2011, but it has taken some
steps toward developing a rule, including publishing a proposed rule
in December 2010 (see figure 4).
Figure 4: Timeline of Steps SEC Has Taken toward Developing a Rule:
[Refer to PDF for image: timeline]
Actions taken:
July 21, 2010:
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank
Act) passed.
December 15, 2010:
SEC published a proposed conflict minerals disclosure rule[A].
October 18, 2011:
SEC hosted a public roundtable to provide a forum for external
stakeholders to discuss the proposed rule[B].
As of April 20, 2012, SEC had received and reviewed over 400 distinct
comment letters and held approximately 140 separate meetings with
external stakeholders regarding the conflict minerals disclosure rule.
Action not taken; deadline passed:
April 17, 2011:
Deadline under section 1502(b) of the Dodd-Frank Act for SEC to issue
a final conflict minerals disclosure rule.
Action to be taken:
January-June 2012:
SEC's last estimated time frame for issuing a final conflict minerals
disclosure rule.
Source: GAO analysis of the Dodd-Frank Act and SEC data.
[A] The proposed rule also extended the comment period to March 2,
2011 from the original comment due date of January 31, 2011.
[B] SEC's notice on the October 2011 roundtable reopened the comment
period until November 1, 2011.
[End of figure]
According to SEC officials, following the passage of the Dodd-Frank
Act in July 2010, SEC announced that it would develop a rule and
called for public comments on the upcoming rule. In September 2010,
SEC posted on its website an estimated issuance date for the proposed
disclosure rule of between October 2010 and December 2010; at this
time SEC also posted on its website an estimated issuance date for the
final rule of between January 2011 and March 2011. In October 2010,
SEC revised its estimated issuance date for a final rule to between
April and July 2011. On December 15, 2010, SEC issued a proposed rule
that reflected the complicated and technical nature of the issues it
covered. The proposed rule was over 100 pages and included over 70
questions in which SEC requested feedback from the public on specific
technical issues, such as whether reporting standards should apply to
all conflict minerals equally, whether certain companies should be
exempt from reporting, and whether there should be a de minimis
threshold for the amount of conflict minerals used in a product.
[Footnote 26]
According to agency officials, in developing a proposed rule, SEC
consulted with its internal experts and State, and gathered extensive
input from external stakeholders through comment letters and meetings.
[Footnote 27] After SEC published a proposed rule in December 2010, it
hosted a roundtable in October 2011 to obtain additional public input
to help inform the development of a final rule. SEC officials also
said that since July 2010--when it announced it intended to develop a
rule--SEC has received a large and steady volume of comment letters
from individuals and groups of external stakeholders, including
various types of companies; industry associations; international
organizations; international NGOs and local NGOs working in Central
Africa; U.S. and foreign officials; private individuals; and others,
with over 400 distinct comment letters posted to its website.[Footnote
28] According to SEC officials, SEC has reviewed these comment letters
and is taking them into account as it develops a final rule.
SEC officials said that they have also received a large number of
meeting requests from external stakeholders to further discuss issues
and concerns about the proposed rule. Since July 2010, SEC
Commissioners, officials, and staff have held and documented
approximately 140 separate meetings with external stakeholders and
posted brief memorandums of the meetings on SEC's website.[Footnote
29] According to SEC officials, approximately 60 of those meetings
involved SEC Commissioners and/or their counsels engaging directly
with external stakeholders. SEC officials said that they are
considering information and input gained from their meetings with
stakeholders as they continue to develop a final rule.
Partly in response to the volume of comments received and meetings
requested, SEC held a public roundtable in October 2011 to discuss the
proposed rule. The roundtable featured panelists from companies that
will likely be affected by a final rule, such as reporting companies,
investment companies, audit firms (which may support covered companies
in their efforts to comply with a final rule), NGOs, and affected
issuers. The SEC Chairman, three other SEC Commissioners, and relevant
SEC officials hosted the roundtable with U.S. Senator Richard Durbin
and U.S. Congressman James McDermott (via videotape) serving as guest
speakers. SEC officials said that the SEC roundtable was a helpful
tool for gathering more information as it continues its work toward
developing a final rule.
SEC's Final Rule Delayed:
Since SEC issued a proposed rule in December 2010, it has announced,
on several occasions, new target dates for the publication of a final
rule, as shown in table 1 below:
Table 1: SEC Announcements of Target Publication Dates for Final
Disclosure Rule:
Date of announcement: April 2011;
New target date for publication of final rule: August 2011-December
2011.
Date of announcement: November 2011;
New target date for publication of final rule: November 2011-December
2011.
Date of announcement: Mid-December 2011;
New target date for publication of final rule: December 2011.
Date of announcement: End of December 2011;
New target date for publication of final rule: January 2012-June 2012.
Source: SEC.
[End of table]
In its December 2011 announcement concerning the target publication
date for a final rule, SEC estimated that it would issue a final rule
by June 2012; however, SEC did not issue a final rule by the end of
June 2012. On July 2, 2012, SEC announced that the Commission will
hold an open meeting on August 22, 2012 to consider whether to adopt a
final conflict minerals disclosure rule.[Footnote 30],[Footnote 31]
SEC officials said that various factors have caused delays in
developing, modifying, and finalizing a rule, as follows:
* Significant learning curve. According to SEC officials, the process
of developing a rule required their staff to become familiar with
several areas that were relatively new to them. For example, they told
us that their staff had to:
- develop contextual understanding about recent events in the DRC and
adjoining countries (including learning about the relevant in-region
political and economic actors, economic arrangements between these
actors, and other evolving issues in these countries);
- learn about complex supply chains and sourcing for conflict
minerals, which includes various U.S. and international companies that
can range in size from very small-scale enterprises to major
multinational corporations;
- stay abreast of external stakeholder efforts to develop and
implement their own responsible supply chain initiatives for conflict
minerals; and:
- understand the implications of using securities law to influence the
behavior of covered companies in a way that would impact the situation
in central African countries.
* Intense stakeholder interest and input. SEC officials said that
responding to intense public and stakeholder interest and input on the
rule has contributed to delays. According to agency officials, the
original comment period on the proposed rule closed on January 31,
2011, but at the request of a wide range of external stakeholders the
Commission extended the comment period to March 2, 2011. Officials
also noted that, in response to requests from some external
stakeholders, the SEC hosted a roundtable on the conflict minerals
disclosure rule and the Commission re-opened the comment period until
November 1, 2011. SEC officials further noted that the Commission
continues to receive comment letters and cited the over 400 distinct
comment letters that it has received. In addition, SEC officials said
that the approximately 140 meetings between the agency and external
stakeholders, the complicated and technical nature of the issues in
these letters and discussions, and the effort required to consider and
address these issues in rule making, has also contributed to delays.
* Heavy rule-making workload. SEC officials noted that Commissioners
have a heavy workload, given that they produce many rules in addition
to the conflict minerals disclosure rule. In April 2012, the SEC
Chairman testified that under the Dodd-Frank Act, SEC is mandated to
write almost 100 rules, while on average the Commission might normally
write about 20 rules in a given year.
* Rigorous economic analysis in rule-making process. To support their
rule making, SEC officials said that they are working closely with SEC
economists and legal experts to develop rigorous economic analysis,
which is a complex and time-consuming process. In her April 2012
testimony statement, the SEC Chairman noted that the agency considers
economic analysis to be a critical element in the rule-making process.
SEC officials also noted that some of the delays in finalizing a
disclosure rule have been necessary to make sure the final rule
appropriately addresses significant cost concerns raised by external
stakeholders. In her testimony statement, the SEC Chairman also
pointed out that recent court decisions and communications from
members of Congress have raised concerns about certain aspects of
SEC's economic analysis in rule making, and that SEC staff recently
developed specific guidance for staff engaged in rule making to
further improve the economic analysis SEC employs in its rule making.
Stakeholder-Developed Initiatives May Facilitate Compliance with the
Anticipated Rule, but Efforts to Improve Some Initiatives Have Been
Hindered by the Absence of a Final Rule:
Various stakeholders have developed and implemented initiatives that
may help covered companies and their suppliers comply with the
anticipated rule.[Footnote 32] However, due to the uncertainty
regarding potential due diligence and disclosure requirements stemming
from SEC's delay in issuing a final rule, some stakeholders' efforts
to improve their initiatives through expansion and harmonization have
been hindered.[Footnote 33]
Stakeholders Have Developed Initiatives:
Although SEC has not issued a final rule, industry associations,
multilateral organizations, and other stakeholders have developed and
implemented initiatives that may help covered companies and their
suppliers comply with the anticipated rule. Stakeholders began work on
most of these initiatives before the Dodd-Frank Act was passed, but
according to agency officials, stakeholders' interest in ensuring that
initiatives will be compatible with SEC's anticipated final rule
appears to have provided a substantial impetus to further develop
initiatives. Stakeholder-developed initiatives--which include the
development of guidance documents, audit protocols, and in-region
sourcing systems--support covered companies' efforts to (1) conduct
due diligence of their conflict minerals supply chains, (2) identify
the source of conflict minerals within their supply chains, and (3)
responsibly source conflict minerals. Table 2 summarizes global and in-
region sourcing initiatives developed by various stakeholders (see
appendix II for more details about each of these initiatives). The
global initiatives may support covered companies' efforts to minimize
the risk of conflict minerals entering their supply chains and to
identify the source of their conflict minerals across conflict
minerals supply chains and around the world, while the in-region
sourcing initiatives may support responsible sourcing of conflict
minerals from Central Africa and the identification of specific mines
of origin for those minerals.
Table 2: Stakeholder-Developed Global and In-Region Sourcing
Initiatives:
Global initiatives:
Initiative: OECD Due Diligence Guidance for Responsible Supply Chains
of Minerals from Conflict-Affected and High-Risk Areas;
Primary organizations involved: Organisation for Economic Co-Operation
and Development (OECD);
Purpose: Establishes practical guidance to enable companies to
responsibly operate in and source from conflict areas and promotes
accountability and transparency in conflict minerals supply chains;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Implementation phase.
Initiative: UNGoE Due Diligence Guidelines;
Primary organizations involved: United Nations Group of Experts
(UNGoE) on the DRC;
Purpose: Establishes practical guidance to enable companies to
responsibly operate in and source from conflict areas and promotes
accountability and transparency in conflict minerals supply chains;
Participation type: Mandatory;
Independent audit required: Yes;
Status of initiative: Implementation phase.
Initiative: Conflict-Free Smelter Program;
Primary organizations involved: Global e-Sustainability Initiative
(GESI);
Electronic Industry Citizenship Coalition (EICC)®;
Purpose: Verifies that the sources of conflict minerals processed by
smelters are conflict-free;
Enables downstream companies to identify and source from conflict-free
smelters;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Implementation phase.
Initiative: WGC Conflict-Free Gold Standard and Tools;
Primary organizations involved: World Gold Council (WGC);
Purpose: Establishes a common approach for mining companies to
responsibly mine gold and demonstrates that their mining operations do
not fuel conflict or the abuse of human rights;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Development phase.
Initiative: LBMA Responsible Gold Guidance;
Primary organizations involved: London Bullion Market Association
(LBMA);
Purpose: Ensures that all gold feed stock and all gold produced by
refiners are conflict-free; Enables downstream companies to identify
and source from conflict-free refiners;
Participation type: Mandatory for LBMA accredited refiners;
Independent audit required: Yes;
Status of initiative: Development phase.
Initiative: RJC Chain-of-Custody Certification Program;
Primary organizations involved: Responsible Jewellery Council (RJC);
Purpose: Supports the identification and tracking of conflict-free
gold throughout gold supply chains with the transfer of chain-of-
custody documentation;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Implementation phase.
In-region sourcing initiatives:
Initiative: ITRI Tin Supply Chain Initiative (iTSCi);
Primary organizations involved: ITRI; Tantalum Niobium International
Study Center; Pact; Channel Research;
Purpose: Supports responsible sourcing from Central Africa through the
development of (1) a physical chain-of-custody system that tracks and
monitors minerals from mine to smelter and (2) a due diligence system
that includes independent audits and mine site and transportation
route assessments;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Implementation phase.
Initiative: Certified Trading Chains;
Primary organizations involved: German Federal Institute for
Geosciences and Natural Resources (BGR);
Purpose: Supports responsible sourcing from Central Africa through the
creation of a certification framework for artisanal mining sites;
Participation type: Voluntary;
Independent audit required: Yes;
Status of initiative: Implementation phase.
Initiative: ICGLR's Regional Certification Mechanism;
Primary organizations involved: International Conference on the Great
Lakes Region (ICGLR);
Purpose: Establishes a certification mechanism for the mining and
trading of conflict minerals from the Great Lakes Region;
Participation type: Mandatory for member countries;
Independent audit required: Yes;
Status of initiative: Development phase.
Source: GAO analysis of information from various sources.
[End of table]
To support companies' efforts to conduct due diligence of their
conflict minerals supply chains, which span the globe, OECD developed
the OECD Due Diligence Guidance for Responsible Supply Chains of
Minerals from Conflict-Affected and High-Risk Areas (hereafter
referred to as OECD Due Diligence Guidance). The guidance establishes
a five-step framework for detailed, risk-based due diligence,
[Footnote 34] which is intended to promote accountability and
transparency in the supply chain of minerals from conflict-affected
and high-risk areas. Covered companies may use the OECD Due Diligence
Guidance to identify appropriate due diligence actions necessary for
obtaining and disclosing conflict mineral sourcing information in
accordance with the anticipated SEC rule. The guidance may also help
U.S. and foreign suppliers put due diligence processes in place, which
may help them generate conflict mineral sourcing information for those
of their customers that are covered companies.
[Side bar: OECD Due Diligence Five-Step Framework:
1. Establish strong company management systems;
2. Identify and assess risk in the supply chain;
3. Design and implement a strategy to respond to identified risks;
4. Carry out independent third-party audit of supply chain due
diligence at identified points in the supply chain;
5. Report on supply chain due diligence.
Source: OECD. End of side bar]
Other global initiatives may support covered companies' efforts to
identify the source of conflict minerals. For example, the Conflict-
Free Smelter Program and the LBMA Responsible Gold Guidance are
initiatives designed to ensure that no minerals in the smelter or
refiner supply chains have contributed to conflict through an
independent audit process, and ultimately, the aim of these programs
is to enable downstream companies to source conflict-free minerals.
According to company and industry association representatives, the
smelter or refiner represents the "choke-point" in the conflict
minerals supply chain--meaning that after minerals are processed by
the smelter or refiner, the origin of these minerals cannot be
verified. According to GeSI, EICC, and LBMA representatives, companies
that can trace their conflict minerals supply chains back to smelters
or refiners certified through these programs can claim that the
minerals in their products are conflict-free, which may help covered
companies and their suppliers comply with the anticipated rule.
Finally, in-region sourcing initiatives that rely on chain-of-custody
systems may help covered companies responsibly source conflict
minerals from Central Africa.[Footnote 35] For example, to support the
responsible sourcing of tin, tantalum, and tungsten from Central
Africa, ITRI, a tin industry association, developed the ITRI Tin
Supply Chain Initiative (iTSCi). The initiative is currently operating
in Katanga--a province in southern DRC--and Rwanda, and through iTSCi
ITRI and its partners created a physical chain-of-custody system for
tracking and monitoring minerals from the mine to the smelter. Figure
5 shows the particular segments of the conflict minerals supply chains
that specific stakeholder-developed initiatives support to ensure that
the minerals are conflict-free (see appendix II for more details
concerning each initiative). According to ITRI and NGO
representatives, iTSCi is a traceability and due diligence program
that creates auditable and verifiable chains of custody for tin,
tantalum, and tungsten through the (1) tagging of bagged materials and
the collection of tagging data and (2) regular incident reporting and
the continuous monitoring of mines and companies participating in the
program.[Footnote 36] iTSCi's traceability and due diligence program
results in mineral chain-of-custody information that covered companies
and their suppliers may use to meet due diligence requirements;
smelters may also use the information in their efforts to comply with
the Conflict-Free Smelter Program.[Footnote 37]
[Side bar: Tantalum Closed-Pipe Supply Chain Systems Supported by
iTSCi:
Two tantalum capacitor manufacturers, AVX and KEMET Electronics
Corporation (KEMET), each developed separate closed-pipe supply chain
systems (systems in which only one company has custody of the minerals
throughout its supply chain) to responsibly source tantalum from
Katanga Province in the DRC. To maintain the integrity of these two
closed-pipe supply chain systems, tantalum is purchased directly from
mine sites participating in iTSCi and shipped to smelters
participating in the Conflict-Free Smelter Program; details on these
two systems follow.
Solutions for Hope: AVX initially worked with Motorola Solutions to
develop Solutions for Hope. A conflict-free smelter received the first
shipment of tantalum mined through iTSCi in November 2011, and AVX
shipped the first batch of conflict-free tantalum capacitors to
Motorola Solutions in March 2012. Since late 2011, several other
companies have agreed to purchase conflict-free material through
Solutions for Hope.
Making Africa Work: KEMET independently developed its closed-pipe
supply chain system for tantalum and recently acquired a tantalum
smelting facility, which is preparing for the Conflict-Free Smelter
Program compliance audit. According to company representatives,
KEMET plans to manufacture conflict-free tantalum capacitors using
material mined in the DRC and processed through its smelter.
Source: GAO analysis of information from AVX and KEMET. End of side
bar]
Figure 5: Segments of Conflict Minerals Supply Chains Supported by
Stakeholder-Developed Initiatives:
[Refer to PDF for image: illustrated table]
Global Initiatives: OECD Due Diligence Guidance;
Mineral ores:
Mines: Tin, tantalum, and tungsten supply chains; Gold supply chain;
Local processors/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Exporters: Tin, tantalum, and tungsten supply chains; Gold supply
chain;
Processed metals and products:
Smelters/refiners: Tin, tantalum, and tungsten supply chains; Gold
supply chain;
Banks/exchanges/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Component parts manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain;
Original equipment manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain.
Global Initiatives: UNGoE Due Diligence Guidelines;
Mineral ores:
Mines: Tin, tantalum, and tungsten supply chains; Gold supply chain;
Local processors/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Exporters: Tin, tantalum, and tungsten supply chains; Gold supply
chain;
Processed metals and products:
Smelters/refiners: Tin, tantalum, and tungsten supply chains; Gold
supply chain;
Banks/exchanges/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Component parts manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain;
Original equipment manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain.
Global Initiatives: GeSI and EICC Conflict-Free Smelter Program;
Mineral ores:
Mines: [Empty];
Local processors/traders: [Empty];
Exporters: [Empty];
Processed metals and products:
Smelters/refiners: Tin, tantalum, and tungsten supply chains; Gold
supply chain;
Banks/exchanges/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Component parts manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain;
Original equipment manufacturers: Tin, tantalum, and tungsten supply
chains; Gold supply chain.
Global Initiatives: WGC Conflict-Free Gold Standard;
Mineral ores:
Mines: Gold supply chain;
Local processors/traders: [Empty];
Exporters: [Empty];
Processed metals and products:
Smelters/refiners: Gold supply chain;
Banks/exchanges/traders: [Empty];
Component parts manufacturers: [Empty];
Original equipment manufacturers: [Empty].
Global Initiatives: LBMA Responsible Gold Guidance;
Mineral ores:
Mines: [Empty];
Local processors/traders: [Empty];
Exporters: [Empty];
Processed metals and products:
Smelters/refiners: Gold supply chain;
Banks/exchanges/traders: Gold supply chain;
Component parts manufacturers: Gold supply chain;
Original equipment manufacturers: Gold supply chain.
Global Initiatives: RJC Chain-of-Custody Certification Program;
Mineral ores:
Mines: Gold supply chain;
Local processors/traders: Gold supply chain;
Exporters: Gold supply chain;
Processed metals and products:
Smelters/refiners: Gold supply chain;
Banks/exchanges/traders: Gold supply chain;
Component parts manufacturers: Gold supply chain;
Original equipment manufacturers: Gold supply chain.
In-Region Sourcing Initiatives:
Global Initiatives: ITRI Tin Supply Chain Initiative;
Mineral ores:
Mines: Tin, tantalum, and tungsten supply chains; Gold supply chain;
Local processors/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Exporters: Tin, tantalum, and tungsten supply chains; Gold supply
chain;
Processed metals and products:
Smelters/refiners: Tin, tantalum, and tungsten supply chains;
Banks/exchanges/traders: [Empty];
Component parts manufacturers: [Empty];
Original equipment manufacturers: [Empty].
Global Initiatives: BGR Certified Trading Chains;
Mineral ores:
Mines: Tin, tantalum, and tungsten supply chains; Gold supply chain;
Local processors/traders: Tin, tantalum, and tungsten supply chains;
Gold supply chain;
Exporters: Tin, tantalum, and tungsten supply chains; Gold supply
chain;
Processed metals and products:
Smelters/refiners: [Empty];
Banks/exchanges/traders: [Empty];
Component parts manufacturers: [Empty];
Original equipment manufacturers: [Empty].
Global Initiatives: ICGLR Regional Certification Mechanism;
Mineral ores:
Mines: Tin, tantalum, and tungsten supply chains;
Local processors/traders: Tin, tantalum, and tungsten supply chains;
Exporters: Tin, tantalum, and tungsten supply chains;
Processed metals and products:
Smelters/refiners: [Empty];
Banks/exchanges/traders: [Empty];
Component parts manufacturers: [Empty];
Original equipment manufacturers: [Empty].
Source: GAO analysis of information from various sources.
[End of figure]
Efforts to Improve Some Initiatives Have Been Hindered:
Some stakeholders' efforts to improve their initiatives through
expansion and harmonization have been hindered by the uncertainty
regarding potential due diligence and disclosure requirements stemming
from SEC's delay in issuing a final rule. For example, while 12 of the
approximately 25 tantalum smelting companies world-wide have been
certified as conflict-free through the Conflict-Free Smelter Program
to date (see figure 6),[Footnote 38] company representatives said GeSI
and the EICC are facing challenges engaging tin and tungsten smelters
in the absence of a final rule.
Figure 6: A Processing Machine in a Certified Conflict-Free Tantalum
Smelting Facility:
[Refer to PDF for image: photograph]
Source: Global Advanced Metals.
[End of figure]
According to company representatives, GeSI and EICC representatives
are finding it difficult to convince Asian--particularly Chinese--
smelters to participate in the program because the electronics
industry has limited leverage over Chinese smelters in the absence of
a final SEC rule. In addition, according to one EICC member company
representative, Chinese smelters and the Chinese government are not
concerned with improving the transparency of supply chains in the
absence of any business incentives. The limited participation by
Chinese smelters may affect the scalability of the Conflict-Free
Smelter Program as Chinese smelters processed an estimated 43 to 48
percent of the global tin supply between 2006 and 2009, and Chinese
companies mined and processed an estimated 77 to 84 percent of the
global tungsten supply between 2006 and 2009. To address this issue,
GeSI and the EICC are working with representatives from other
industries that use more tin and tungsten to expand GeSI and the
EICC's leverage over and outreach efforts to tin and tungsten
smelters. In addition, according to company representatives, the
issuance of SEC's final rule may provide business incentives to
Chinese smelters. Specifically, the issuance of a final SEC rule may
result in covered companies' widespread demand for conflict mineral
sourcing information from their suppliers, and the leverage applied by
all impacted covered companies may create the necessary business
incentives for Chinese and other foreign companies to participate in
initiatives such as the Conflict-Free Smelter Program.
Some stakeholders have discussed efforts to harmonize their
initiatives to further improve them, but some of these efforts have
been hindered by the absence of SEC's final rule. For example,
according to an industry association representative, iTSCi may
experience difficulty attracting additional customers, such as
smelters, and expanding the initiative until it is successfully
harmonized with the Conflict-Free Smelter Program. Although GeSI,
EICC, and ITRI representatives said their organizations are working
together to harmonize the documentation and audit systems for the
Conflict-Free Smelter Program and iTSCi, the absence of a final rule
has hindered discussions to harmonize the two initiatives. As of June
2012, only one smelter purchased tin through the program, four
smelters purchased tantalum, and no smelters purchased tungsten. While
ITRI and its partners intend to expand iTSCi into eastern DRC, without
additional customers and the resulting funding from customers, it may
be challenging to implement this expansion. In addition, according to
an industry association representative, the unstable security
situation in eastern DRC contributes to ITRI and its partners' delay
in expanding iTSCi to the region.[Footnote 39] Although smelters
participating in the Conflict-Free Smelter Program are allowed to
accept conflict-free minerals from the DRC, an ITRI representative
said that some smelters have been unwilling to purchase minerals
through iTSCi's traceability and due diligence program, because the
initiative has not been harmonized with the Conflict-Free Smelter
Program. iTSCi is closely aligned with the OECD Due Diligence Guidance
and supports continuous trading and the implementation of risk
mitigation efforts when certain risks at a supplier's mine site are
identified through the program. However, the Conflict-Free Smelter
Program may require smelters to disengage from that supplier if the
same risks are identified at the mine site, because according to GeSI
and EICC representatives, the program's requirements were developed to
be consistent with section 1502(b) of the Dodd-Frank Act. In
particular, section 1502(b) of the Act does not discuss mitigation
efforts, while the OECD Due Diligence Guidance endorses implementation
of risk mitigation efforts for certain risks. In the absence of SEC's
final rule, it is unclear if the initiatives, which were developed to
meet different requirements, can or will be successfully harmonized.
Little Additional Information on the Rate of Sexual Violence in
Eastern DRC and Neighboring Countries Has Become Available since GAO's
2011 Report:
Since our 2011 report, one population-based survey has been conducted
in Rwanda, while none have been conducted in eastern DRC, Uganda, or
Burundi. Also, we found some additional case file data available on
sexual violence for these areas; however, as we reported in 2011, case
file data on sexual violence are not suitable for estimating a rate of
sexual violence.
Since Our 2011 Report, One Population-Based Survey Has Been Conducted
in Rwanda and None in Eastern DRC, Uganda, or Burundi:
In our 2011 report on sexual violence, we found five population-based
surveys that provided data on the rate of sexual violence in eastern
DRC and Uganda. During our current review, we identified one new
population-based survey--a 2010 Demographic and Health Survey (DHS)
conducted in Rwanda that estimates that 22 percent of women ages 15 to
49 have experienced sexual violence in that country in their
lifetimes.[Footnote 40],[Footnote 41] Table 3 provides further details
on these six surveys.
Table 3: Population-Based Surveys That Estimate the Rate of Sexual
Violence in Rwanda, Eastern DRC, and Uganda:
Author/publication date: DHS for Rwanda;
Dates of data collection: 2010;
Time period evaluated: Lifetime of participant;
Survey participants: Females ages 15-49;
Reported experience of sexual violence (time period):
* During lifetimes of participants, 22 percent of females experienced
sexual violence;
New data since GAO's 2011 report? Yes.
Author/publication date: McGill University (DRC) (August 2010);
Dates of data collection: March 2010;
Time period evaluated: Prior 1 year; prior 2 years; 1994-2010;
Survey participants: Males and females ages 18+;
Reported experience of sexual violence (time period):
* During the prior 1 year, 9 percent experienced sexual violence;
* During the prior 2 years, 13 percent experienced sexual violence;
* For the time period 1994-2010, 33 percent experienced sexual
violence;
New data since GAO's 2011 report? No.
Author/publication date: University of California Berkeley (DRC)
(August 2008);
Dates of data collection: September to December 2007;
Time period evaluated: 1993 through 2007;
Survey participants: Males and females ages 18+;
Reported experience of sexual violence (time period):
* 16 percent experienced sexual violence;
New data since GAO's 2011 report? No.
Author/publication date: DRC Ministry of Planning (August 2008);
Dates of data collection: January to August 2007;
Time period evaluated: In 1 year prior to data collected;
lifetime of participant;
Survey participants: Females ages 15-49;
Reported experience of sexual violence (time period):
* During 1 year prior to data collected, 8 percent of females in North
Kivu experienced sexual violence and 6 percent of females in South
Kivu experienced sexual violence;
* During lifetimes of participants, 25 percent of females in North
Kivu experienced sexual violence and 18 percent of females in South
Kivu experienced sexual violence;
New data since GAO's 2011 report? No.
Author/publication date: University of California Berkeley (Uganda)
(December 2010);
Dates of data collection: April to May 2010;
Time period evaluated: Prior 1 year;
1987 to 2005;
Survey participants: Males and females ages 18+;
Reported experience of sexual violence (time period):
* During the prior 1 year, less than 0.5 percent experienced sexual
violence;
* For the time period 1987 to 2005, 2 percent experienced sexual
violence;
New data since GAO's 2011 report? No.
Author/publication date: Uganda Bureau of Statistics (August 2007);
Dates of data collection: May to October 2006;
Time period evaluated: Lifetime of participant;
Survey participants: Females ages 15-54; males ages 15-49;
Reported experience of sexual violence (time period):
* During lifetimes of participants, 39 percent of females experienced
sexual violence;
* During lifetimes of participants,11 percent of males experienced
sexual violence;
New data since GAO's 2011 report? No.
Source: GAO 2011 report on sexual violence (GAO-11-702) and GAO
analysis of DHS study.
[End of table]
We found no new survey data on sexual violence in eastern DRC. The
authors of the McGill study, a population-based survey conducted in
eastern DRC that was highlighted in our 2011 report, have no plans to
conduct a follow-up survey. McGill's 2010 report was intended to serve
as a baseline study, but a lack of funding has prevented another round
of data collection.[Footnote 42]
Other organizations have plans to conduct population-based surveys in
eastern DRC. Researchers at ICF International told us that the next
DHS survey in DRC is expected to launch in 2012 with preliminary
findings expected at the end of the year; the researchers project that
the final report will be issued sometime in 2013. In our 2011 report,
we also discussed a population-based survey conducted in eastern DRC
in 2008 by researchers at the University of California, Berkeley;
those researchers are now at the Harvard Humanitarian Initiative and
are conducting a follow-up survey. The results from the follow-up
survey, however, will not be available until November 2012.
Some Additional Case File Data Has Become Available on Sexual Violence
since GAO's 2011 Report:
[Side bar: Surveys Are More Appropriate for Estimating a Rate of
Sexual Violence:
In our 2011 report on sexual violence, we discussed two sources of
data on sexual violence in eastern DRC and neighboring countries—
population-based surveys and case files—and concluded that population-
based surveys are more appropriate for estimating a rate of sexual
violence. Case file data have shortcomings and biases that
significantly limit their utility for estimating the rate of sexual
violence. For example, case file data are not generated from a random
sample; are reliant on victims seeking services to be counted,
although some victims may lack access to services; and allow for the
potential double counting of the same sexual violence incident in the
case file data collected. End of side bar]
Following up on our 2011 report, we asked the United Nations
Population Fund, the International Rescue Committee, and other
organizations if they had any updated case file data, but
representatives from the United Nations Population Fund reported that
no new case file data were available and we received no response from
the International Rescue Committee. Our 2011 report also referenced
case file data from the 2010 Report of the Secretary-General on the
implementation of Security Council resolutions 1820 and 1888, as well
as State's 2009 and 2010 Human Rights Reports. In a 2012 Report of the
Secretary-General that included an update on the implementation of
Security Council resolutions 1820 and 1888, it was reported that,
between December 2010 and November 2011, 625 sexual violence assaults
committed by armed groups were documented in eastern DRC. Further,
from October 2010 to August 2011, the report notes that 9,534 sexual
violence victims in eastern DRC received medical and psychosocial
assistance; however, as the report acknowledges, the number of
assisted victims does not represent the number of new sexual violence
cases during the reporting period. In addition, the 2011 Department of
State Human Rights Reports found the following:
* In DRC, between January 2010 and September 2011, the United Nations
Children's Fund reported that approximately 21,395 sexual violence
victims received medical care, of which 12,829 were in eastern DRC.
* In Rwanda, 1,056 cases of adult rape were reported in 2010; the
police reported that they investigated 287 cases. Of those 1,056
cases, 433 were filed in courts, 201 were dropped and 422 were pending
investigation.
* In Uganda, 709 cases of rape were reported in 2010 of which 252 were
tried. In November 2010, the United Nations Population Fund reported
that 24 percent of women said their first sexual encounter was violent.
* In Burundi, 3,781 cases of gender-based violence were reported in
2010. In addition, according to the United Nations Children's Fund,
approximately 60 percent of reported rapes were of children under age
18 and 20 percent of reported rapes were of children under age 12.
Also, the International Medical Corps reported that in 2011 it
provided medical and psychosocial counseling at 60 health clinics in
North and South Kivu to 1,200 sexual violence victims. As we reported
in 2011, case file data on sexual violence are not suitable for
estimating a rate of sexual violence.
Conclusions:
As part of U.S. efforts to address sexual violence and other human
rights abuses perpetrated by armed groups in the DRC, Congress enacted
and the President signed into law legislation requiring that SEC issue
a conflict minerals disclosure rule, which would require covered
companies to disclose whether necessary conflict minerals used in
their products originated in the DRC or an adjoining country and, if
they did, to provide an additional report with certain disclosures.
SEC has taken some important steps in its effort to issue a rule,
including issuing a proposed rule that generated a large volume of
public comments. However, SEC has not yet finalized and issued a rule
as stipulated in the Act, largely due to the time and effort required
for the Commission to understand the complexities of the four conflict
minerals' supply chains, review the large volume of comment letters,
and hold the numerous meetings requested by stakeholders.
The continued delay in issuing a final rule, however, has contributed
to a lingering uncertainty among industry and other stakeholders who
expect their actions to be guided by a final rule. Some of these
industry and other stakeholders have engaged in the development of
various initiatives that they hope may help covered companies comply
with the anticipated rule, in part by helping foreign and domestic
suppliers of those covered companies trace minerals in their supply
chains. Without a final rule, it is unclear to what extent the
initiatives currently being developed or implemented by industry and
other stakeholders will achieve results consistent with those
anticipated under the conflict minerals legislation. Moreover, in part
because of the delay in the rule's issuance, many companies across the
tin, tantalum, tungsten, and gold supply chains are reluctant to
participate in or support the global and in-region initiatives
currently being developed or implemented because they are uncertain
whether or not the initiatives will align with the anticipated rule.
Recommendation for Executive Action:
To address the delay and uncertainty in finalizing a conflict minerals
disclosure rule regarding what covered companies will be required to
do, we recommend that the Chairman of SEC identify the remaining steps
it needs to take and the associated time frames to finalize and issue
such a conflict minerals disclosure rule.
Agency Comments and Our Evaluation:
We provided a draft of this report to SEC, State, Department of
Defense, and USAID, for their review and comment. We received written
comments from SEC that are reprinted in appendix III. While SEC
neither agreed nor disagreed with our recommendation, in its comment
letter, SEC said that it would continue its endeavor to complete the
rule making expeditiously to provide certainty. It noted that, having
issued a proposed rule, the required steps for adopting a final rule
are determined by the majority of the Commission's five members, whose
deliberations are subject to the requirements of the Government in the
Sunshine Act. On July 2, 2012, SEC announced, on its website, that the
conflict minerals disclosure rule would be on the agenda for
consideration at the Commission's "Sunshine Act meeting" scheduled for
August 22, 2012. SEC and State also provided technical comments, which
we incorporated in this report as appropriate. The Department of
Defense and USAID had no comments on this report. We also provided
relevant portions of the draft of this report to relevant external
stakeholders for their technical comments. We received technical
comments from these stakeholders, which we incorporated throughout
this report as appropriate. In addition, based on the technical
comments we received from agencies and external stakeholders, we
revised the title of our draft report to better capture the most
recent developments.
We are sending copies of this report to interested congressional
committees. In addition, this report is available at no charge on
GAO's website at [hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-8980 or courtsm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made key contributions
to this report are listed in appendix IV.
Signed by:
Michael J. Courts:
Acting Director International Affairs and Trade:
List of Congressional Committees:
The Honorable Tim Johnson:
Chairman:
The Honorable Richard C. Shelby:
Ranking Member:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Honorable Max Baucus:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable John F. Kerry:
Chairman:
The Honorable Richard G. Lugar:
Ranking Member:
Committee on Foreign Relations:
United States Senate:
The Honorable Spencer Bachus:
Chairman:
The Honorable Barney Frank:
Ranking Member:
Committee on Financial Services:
House of Representatives:
The Honorable Ileana Ros-Lehtinen:
Chairman:
The Honorable Howard L. Berman:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The Honorable Dave Camp:
Chairman:
The Honorable Sander Levin:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
The Honorable Patrick Leahy:
Chairman:
The Honorable Lindsey Graham:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Kay Granger:
Chairman:
The Honorable Nita Lowey:
Ranking Member Subcommittee on State, Foreign Operations, and Related
Programs:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To examine the steps the Securities and Exchange Commission (SEC) has
taken to issue a conflict minerals disclosure rule, we reviewed
Section 1502(b) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. No. 111-203), SEC's proposed rule, comment
letters regarding the rule submitted to and posted by SEC to its
website, and other documents from SEC.[Footnote 43] In addition, we
interviewed officials from SEC working on the rule and attended a
public roundtable in October 2011, which was convened by SEC to
discuss the proposed rule. To understand the role of the Department of
State (State) in supporting SEC's efforts to develop the rule, we
interviewed officials from SEC and State.
To identify and examine initiatives developed by industry,
multilateral organizations, and other stakeholders that may help
covered companies comply with the anticipated SEC rule, we reviewed
documents from State and the United States Agency for International
Development (USAID), such as press releases and a presentation;
reports issued by the United Nations Group of Experts on the
Democratic Republic of the Congo (UNGoE); guidance documents and
reports from the Organisation for Economic Co-operation and
Development (OECD); and guidance documents, reports, and presentations
from the International Conference on the Great Lakes Region (ICGLR).
We also reviewed numerous documents and reports by industry
associations, companies, nongovernmental agencies (NGOs), and
consulting firms.
Throughout the course of our review, we met and corresponded with over
40 U.S. and foreign government officials and other representatives,
including representatives from ICGLR and several NGOs, to discuss the
actions relevant stakeholders have taken to develop and implement
initiatives that may help covered companies comply with the
anticipated rule. Specifically, we met with officials from State,
USAID, the United Kingdom Foreign and Commonwealth Office, the
European Union, and the German Federal Institute for Geosciences and
Natural Resources (BGR). We also interviewed and corresponded with
representatives from 4 multilateral organizations; 11 industry
associations, including manufacturing, electronic, automotive, gold,
and jewelry industry associations; 10 companies, including component
parts manufacturers and original equipment manufacturers from various
industries; 5 smelters, including companies processing tin, tantalum,
and tungsten, and 1 gold refiner; 4 NGOs; 3 consulting firms; and 1
gold industry expert. To help gather information for the review, we
traveled to the United Kingdom, France, Belgium, and Germany to
interview representatives from the OECD Secretariat, foreign
government officials, and representatives from foreign companies--
including smelters, industry associations, and consulting firms. Where
company names were used in the report, we obtained permission from
said companies.
In response to a requirement in the Dodd-Frank Wall Street Reform and
Consumer Protection Act that GAO submit an annual report that assesses
the rate of sexual violence in war-torn areas of the Democratic
Republic of the Congo (DRC) and adjoining countries, we identified and
assessed any additional information available on sexual violence in
war-torn eastern DRC, as well as three neighboring countries that
border eastern DRC--Rwanda, Uganda, and Burundi--since our 2011 report
on sexual violence in these areas.[Footnote 44] During the course of
our review, we interviewed officials from State, USAID, and the
Department of Defense and interviewed NGO representatives and
researchers to discuss the collection of sexual violence-related data--
including population-based surveys and case file data--in the DRC and
adjoining countries. Specifically, we followed up with researchers and
representatives from those groups we interviewed for our prior review
on sexual violence rates in eastern DRC and neighboring countries,
including a researcher from the Department of Defense (Office of the
Assistant Secretary of Defense for Health Affairs), officials from the
United Nations Population Fund, representatives from the International
Rescue Committee and the Harvard Humanitarian Initiative, and others.
In addition, we interviewed representatives from the International
Medical Corps for this review, a group with which we had not
previously met. We also conducted thorough Internet literature
searches to identify new academic articles containing any additional
data on sexual violence.
We conducted this performance audit from August 2011 to July 2012 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Descriptions of Global and In-Region Sourcing Initiatives:
Various stakeholders have developed and implemented initiatives that
may help covered companies and their suppliers comply with SEC's
anticipated conflict minerals disclosure rule. Some of these
initiatives can be characterized as global because they may support
covered companies' efforts to identify the source of their conflict
minerals across conflict minerals supply chains around the world.
Other initiatives can be described as in-region sourcing initiatives
because they may support responsible sourcing of conflict minerals
from Central Africa and the identification of those minerals' specific
mines of origin.
Global Initiatives:
OECD Due Diligence Guidance:
In consultation with a multi-stakeholder workgroup, OECD developed the
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals
from Conflict-Affected and High-Risk Areas (hereafter referred to as
OECD Due Diligence Guidance) to promote accountability and
transparency in conflict minerals supply chains. In July 2009, prior
to the passage of the Dodd-Frank Act, Leaders of the Group of 8 (G-8)
[Footnote 45] reaffirmed their commitment to the implementation of
initiatives that help reduce conflict that is fueled by revenues from
natural resources; supported the ICGLR's efforts to address illegal
exploitation of natural resources; and encouraged the OECD and other
multilateral organizations to work with the ICGLR to further develop
practical guidance for businesses operating in countries with weak
governance. In response, OECD began consulting with various
stakeholders in December 2009 to learn about conflict minerals supply
chains, and in April 2010, OECD created a multi-stakeholder workgroup-
-consisting of representatives from the UNGoE, ICGLR, NGOs, companies,
industry associations, and others--to develop due diligence guidance.
The workgroup endorsed the draft OECD Due Diligence guidance in
November 2010 and OECD formally adopted it as an OECD Council
Recommendation in May 2011. Several organizations, including some
industry associations and companies, and individuals have submitted
letters to SEC recommending that SEC's final rule suggest the use of
the OECD Due Diligence Guidance. In addition, in December 2010 the
heads of states from the 11 member countries of the ICGLR endorsed the
OECD Due Diligence Guidance and called upon companies sourcing
minerals from the Great Lakes Region to comply with the guidance; in
July 2011 State endorsed the framework set forth in the guidance and
encouraged companies within the conflict minerals supply chains to
exercise due diligence in accordance with the framework; and an UNGoE
report noted that in September 2011 the DRC Ministry of Mines issued a
law requiring all mining operators in the country to comply with the
guidance. Moreover, various stakeholders have shown their support for
the OECD Due Diligence Guidance by aligning their own global and in-
region sourcing initiatives with it.
The OECD Due Diligence Guidance and the corresponding supplements
provide detailed guidance for companies operating in and sourcing
minerals from conflict areas. For example, steps two and three of
OECD's Five-Step Framework call for the implementation of a strategy
to identify risks and support the development of risk mitigation
efforts to respond to risk, when appropriate. The guidance allows a
company to continue trading with suppliers during the implementation
of risk mitigation efforts.[Footnote 46] In addition to the basic five-
step framework, OECD developed two supplements--the Supplement on Tin,
Tantalum and Tungsten and the Supplement on Gold--to provide companies
with specific guidance relevant to the conflict minerals supply
chains.[Footnote 47]
To increase awareness of and to develop emerging practices for
implementing the OECD Due Diligence Guidance and the Supplement on
Tin, Tantalum, and Tungsten, OECD is conducting an implementation
pilot project. The project began in May 2011 and includes companies
spanning the entire supply chain from the mine site to the original
equipment manufacturers that use some of the derivatives of conflict
minerals in the products they sell. Approximately 100 companies--
including mining companies, traders, smelting companies, component
manufacturers, product manufacturers, original equipment
manufacturers, and industry associations--are voluntarily
participating in the pilot project. Participating companies are
completing surveys to report on their progress and any challenges
faced while implementing the OECD Due Diligence Guidance. According to
representatives from the OECD Secretariat and representatives from two
consulting firms, at the end of the project emerging practices will be
identified to assist companies in implementing the OECD Due Diligence
Guidance. OECD launched a similar implementation pilot project for the
Supplement on Gold in May 2012.
The first two phases of the implementation pilot project have
demonstrated positive developments in participants' efforts to
implement the OECD Due Diligence Guidance. For example, recently,
mining cooperatives, local traders, and other groups involved in
mining activities in the DRC have started collaborating with civil
society to create SAVE ACT MINE/DRC, a non-profit organization that
aims to increase understanding of the OECD Due Diligence Guidance by
translating the guidance into local languages and by hosting
workshops. One representative from the OECD Secretariat opined that,
although this is still a nascent effort, SAVE ACT MINE/DRC represents
a significant development because the private sector in the DRC has
begun to recognize that they are responsible for their supply chains
and should take ownership over the implementation of international
standards.[Footnote 48] In addition, some original equipment
manufacturers participating in the project are putting pressure on
other companies within their own conflict minerals supply chains to
implement due diligence standards through contractual clauses, which
will support the companies' efforts to collect sourcing information
from suppliers.
UNGoE Due Diligence Guidelines:
United Nations Security Council (UNSC) resolution 1896 (2009) called
on UNGoE to provide recommendations for due diligence guidelines for
importers, processors, and consumers of minerals originating from the
DRC. UNGoE participated in the OECD Due Diligence Guidance multi-
stakeholder workgroup, and in a November 2010 report provided a
recommendation to the UNSC that companies adopt the five-step
framework for detailed due diligence that the OECD workgroup
developed. UNSC resolution 1952 supported UNGoE's due diligence
guidance recommendations; UNGoE's recommended due diligence guidelines
are similar to and fully consistent with the OECD Due Diligence
Guidance. Individuals and entities may be subject to UN sanctions for
not applying the due diligence guidelines.
Conflict-Free Smelter Program:
The Global e-Sustainability Initiative (GeSI) and the Electronic
Industry Citizenship Coalition (EICC) have co-developed the Conflict-
Free Smelter Program to verify the sources of conflict minerals
processed by smelters and refiners.[Footnote 49],[Footnote 50] The aim
of this program is to enable companies--both covered companies and
their suppliers--to source conflict-free minerals. Companies that can
trace their conflict minerals supply chains back to a conflict-free
smelter can claim the minerals in their products are conflict-free.
The Conflict-Free Smelter Program is a voluntary program in which
smelters undergo an independent third party audit, in accordance with
the OECD Due Diligence Guidance, to verify the origin of minerals
processed at their facilities. GeSI and the EICC have also developed
audit protocols for the program in consultation with a number of
stakeholders--including NGOs, smelters, component manufacturers,
original equipment manufacturers, and industry associations within and
outside the electronics industry--to ensure wide-spread support for
the program.[Footnote 51] In December 2010, the first tantalum smelter
was certified conflict-free through the program after successfully
completing an audit, and as of July 2012, 12 of approximately 25
tantalum smelting companies had been certified as conflict-free. As of
July 2012, two tin smelting companies had been certified as conflict-
free, five tungsten smelting companies had begun discussions with
representatives of the program, and five gold refining companies had
been certified as conflict-free through the program.[Footnote 52]
World Gold Council's Conflict-Free Gold Standard and Tools:
Representing top gold mining companies, the World Gold Council (WGC)
is developing a global initiative to help support gold mining
companies in their efforts to responsibly mine gold worldwide. For
this initiative, WGC is creating the Conflict-Free Gold Standard, an
assurance framework, and a toolkit, with the input from mining
companies, refiners, and other relevant stakeholders. The Conflict-
Free Gold Standard establishes a common approach for gold mining
companies to demonstrate that the gold they extract does not fuel
conflict or human rights abuses. The standard is aligned with the OECD
Due Diligence Guidance,[Footnote 53] and covers the industrial mining
supply chain from the mine to the refiner. However, the standard does
not cover gold from recycled sources or gold mined by artisanal
miners. WGC is also developing an assurance framework, which can be
used by third-party auditors to monitor mining companies' compliance
with the standard, and tools to support mining companies through the
audit process. According to WGC representatives, WGC plans to release
the final standard, the assurance framework, and other tools before
the end of 2012. Although the standard only covers gold mining
companies, it may support certification programs at the refiner level.
For example, according to gold industry representatives, the standard
was developed with input from the London Bullion Market Association
(LBMA), and it will support the efforts of those refiners purchasing
gold from mining companies in compliance with the WGC Conflict-Free
Gold Standard to comply with the LBMA Responsible Gold Guidance.
LBMA's Responsible Gold Guidance:
Distinct from WGC, whose standard covers the gold supply chain from
mine to refiner, the LBMA has developed its own Responsible Gold
Guidance to ensure that the gold refiners it accredits only purchase
conflict-free gold.[Footnote 54] In January 2012, LBMA finalized and
published its guidance, which is based on the OECD Due Diligence
Guidance,[Footnote 55] and plans to develop and finalize audit
protocols and other tools for use with the standard by July 2012.
According to an LBMA representative, by December 2013 LBMA gold
refiners will need to comply with the LBMA guidance and pass a third-
party audit verifying their compliance to maintain their
accreditation. Similar to the Conflict-Free Smelter Program, the goal
of the LBMA initiative is to enable companies to say that the gold in
their products is conflict-free if they can trace their gold supply
chains to an LBMA accredited gold refiner (see figure 7). According to
industry representatives, in May 2012 LBMA, GeSI, and the EICC began
the process to harmonize the two smelter and refiner certification
programs to avoid duplicative efforts and any unnecessary burden on
refiners.
Figure 7: Gold Bars Produced by LBMA Accredited Refiners:
[Refer to PDF for image: photograph]
Source: LBMA.
[End of figure]
Responsible Jewellery Council Chain-of-Custody Certification Program:
The Responsible Jewellery Council (RJC)--a diamond and precious metals
industry association--created a chain-of-custody certification program
in March 2012 to help its member companies identify and track conflict-
free gold throughout their supply chains.[Footnote 56],[Footnote 57]
RJC designed a certification standard and developed several tools for
the program--including a certification handbook, guidance, and an
assessment toolkit--in collaboration with industry associations,
companies, NGOs, and independent experts. According to RJC
representatives, RJC began developing the program in early 2010 to
support responsible sourcing, and after the passage of the Dodd-Frank
Act, RJC incorporated measures into the program to support covered
companies' compliance with section 1502(b) of the Dodd-Frank Act.
Conflict-free mined, recycled, and grandfathered gold is tracked
through the supply chain from mine to end user with the use of RJC
tracking records to ensure a proper chain of custody is maintained.
[Footnote 58] Participating RJC members must be independently audited
to be certified, in accordance with the OECD Due Diligence Guidance,
and RJC recognizes and accepts audits completed under the GeSI and
EICC Conflict-Free Smelter Program, as well as WGC's and LBMA's
initiatives.
Two factors may limit the efficacy of RJC's chain-of-custody
certification program. First, certification under RJC's program is
voluntary and companies may determine which parts of their business
and which materials they want to certify. Second, companies certified
under RJC's program are not prevented from sourcing from mining
entities outside the program; gold purchased from a mine outside the
program simply has to be segregated from gold from certified
suppliers. While some refiner representatives report that segregation
of gold in their facilities is difficult, several gold refiners have
been certified as conflict-free through the RJC chain-of-custody
certification program.
In-Region Sourcing Initiatives:
ITRI Tin Supply Chain Initiative (iTSCi):
ITRI, an international tin industry association, began developing the
ITRI Tin Supply Chain Initiative (iTSCi) in 2008 to improve due
diligence and traceability within the tin, tantalum, and tungsten
supply chains. ITRI initially designed the initiative to support the
responsible sourcing of tin from Central Africa, but in 2010 ITRI
began working with the Tantalum Niobium International Study Center to
include tantalum. At that time, the initiative was also expanded to
include tungsten. iTSCi has three components: (1) a physical chain-of-
custody system to track and monitor minerals from the mine to the
smelter; (2) independent third-party risk assessments of mine sites,
transport routes, and companies involved in mining and transport to
identify and manage conflict-related risks; and (3) independent third-
party audits of all participants in the initiative. iTSCi helps
companies comply with the OECD Due Diligence Guidance through these
three components. According to an industry association representative,
as of June 2012, iTSCi was being implemented at tin, tantalum, and
tungsten mine sites, including approximately 1500 mine areas in the
Katanga Province in the DRC and at approximately 400 mine areas in
Rwanda, and the programs in both countries support approximately
45,000 artisanal miners.[Footnote 59],[Footnote 60]
Although iTSCi was started and overseen by ITRI, it was developed with
input from local and national officials in the DRC and Rwanda and it
is being implemented by local organizations and national officials in
their countries, with support from Pact, a NGO, and Channel Research,
an independent auditor. Pact manages the initiative's field operations
and performs initial mine risk assessments; coordinates with DRC and
Rwandan government officials and local NGOs to implement the
initiative at mine sites; continuously monitors activities on the
ground; and helps train government officials to build their capacity.
Channel Research is in charge of conducting pre-audits, governance
assessments, and company audits of the companies participating in
iTSCi.
Through audits, assessments, and continuous monitoring of the
initiative, ITRI and its partners identified a number of problems with
current operations. For example, ITRI representatives reported a
number of problems with the iTSCi system, including duplicate tags,
tags appearing in the wrong places, and bag weights increasing between
check points in the supply chain. ITRI began addressing these concerns
in 2011 through the development of an incident reporting template that
staff are using to record and report incidents. According to an iTSCi
document, the new protocol will ensure a timely and consistent
identification and response to incidents. According to an iTSCi
report, incidents have been reported, but at a low frequency in
comparison to the amount of material bagged and tagged.
Certified Trading Chains Program and the Implementation of a National
Certification and Traceability System in DRC:
According to BGR representatives, since 2008 the German government's
Federal Institute for Geosciences and Natural Resources (BGR) and its
partners have helped build capacity within the DRC and Rwandan
governments through several initiatives, including a certified trading
chains program and the development of a national certification and
traceability system. BGR and its partners have developed and piloted
the certified trading chains program in eastern DRC and Rwanda to help
the governments formalize the artisanal mining sectors (see figure 8).
BGR and its partners work with the host government and other
stakeholders to develop standards by which mines are independently
assessed, and the organization provides technical support for the host
government to implement the program.[Footnote 61] According to BGR
representatives, BGR and its partners are currently conducting a pilot
program for the certification of four mine sites in South Kivu, in
eastern DRC. In Rwanda, three of the five mine sites audited between
November 2008 and June 2011 have been certified through the
program.[Footnote 62] BGR representatives noted that they are planning
to implement the certified trading changes program at additional mine
sites in North and South Kivu in 2012. However, they also noted that
the security situation in eastern DRC remains a challenge to the
implementation of initiatives in the region.
Figure 8: Artisanal Miners Panning Tin Ore at a Rwandan Mine Site:
[Refer to PDF for image: photograph]
Source: BGR.
[End of figure]
BGR and its partners have also been helping the DRC government develop
a national certification and traceability system for tin, tantalum,
tungsten, and gold since 2009;[Footnote 63] the certification system
is based on the certified trading chains project. As part of the
governments' efforts to develop the system, BGR and its partners are
working with representatives from the DRC government and others to
inspect mine sites in eastern DRC. Specifically, the mine site
validation missions are joint missions supported by BGR and include
representatives from the local and national governments, civil
society, industry, the United Nations Organization Stabilization
Mission in the Democratic Republic of the Congo (MONUSCO), and ITRI.
According to BGR officials, the goal is to regularly monitor the
security situation at the mine sites, as part of the government's
efforts to map mining sites and armed group locations.[Footnote 64] In
June 2011 and August 2011, the mine site validation teams conducted
some mine site qualification reviews; however, the DRC government
published the results of the mine site qualification reviews over 8
months after the mine site validation missions occurred, limiting the
public's access to timely information concerning the security
situation at the mines.[Footnote 65]
According to BGR officials, BGR and its partners' in-region sourcing
initiatives provide companies that purchase minerals through the
program with assurances that artisanal miners participating in the
initiative produce and trade minerals in accordance with accepted
standards. BGR and its partners provide these assurances by certifying
mine sites and helping to build the capacity of Congolese and Rwandan
government officials. In addition, the maps being developed by the DRC
government, in conjunction with BGR and other groups, may serve as a
tool for companies to determine the conflict status of a mine site
when conducting due diligence.
ICGLR's Regional Certification Mechanism:
With technical support from several NGO partners, ICGLR designed a
regional chain-of-custody tracking system and standards to ensure that
conflict minerals are fully traceable from the mine site to the point
of export; however, the implementation of the system is only in the
nascent stages and is dependent on the actions of the participating
national governments. In December 2006, the heads of the 11 African
states that form the ICGLR signed the Pact on Security, Stability and
Development in the Great Lakes Region, which included the Protocol
Against the Illegal Exploitation of Natural Resources. In accordance
with the protocol, ICGLR member states agreed to put in place regional
rules and monitoring mechanisms for combating the illegal exploitation
of natural resources. To curb the financing of rebel groups through
the illegal exploitation of natural resources, ICGLR developed and
approved six tools for implementation in the Great Lakes
Region.[Footnote 66] ICGLR worked with Partnership Africa Canada to
develop one of the tools, a regional certification mechanism, which
was approved by the ICGLR member states in December 2010. ICGLR's
regional certification mechanism may enable member countries and their
mining companies to demonstrate where and under what conditions
minerals were produced; through the regional certification mechanism,
individual member governments are to issue ICGLR regional certificates
for those mineral shipments that are in compliance with the standards
of the mechanism.
Several partners support ICGLR and member countries' efforts to
implement the mechanism. For example, one NGO is helping the ICGLR
develop a regional database, which would house data collected at the
mine site and at the point of export, to track mineral flows through
the region. At this time, the development of the databases and
collection of data is an ongoing process. In addition, the German
International Cooperation is consulting with ICGLR as it begins to set
up a regional audit committee, which will be responsible for
accrediting third-party auditors and overseeing the mechanism's audit
system. Partnership Africa Canada and BGR are also supporting the
national authorities in Burundi with implementation of the regional
certification mechanism.
According to a report by GeSI and the EICC and an ICGLR
representative, ICGLR member countries are expected to harmonize their
national legislation with the regional certification mechanism and
develop a national certification and traceability system prior to
issuing ICGLR regional certificates. According to an ICGLR
representative, a report by GeSI and the EICC, and a report by the
International Peace Information Service, the DRC government
incorporated the ICGLR Regional Certification Manual into the national
legal framework in February 2012, and Rwanda is expected to adopt
similar legislation shortly.[Footnote 67] BGR's and ITRI's initiatives
support the implementation of the regional certification mechanism at
the national level, because all activities undertaken through these
initiatives are incorporated into the DRC and Rwandan national efforts
to develop national certification and traceability systems. As of
April 2012, none of the ICGLR member states had issued an ICGLR
regional certificate.
[End of section]
Appendix III: Comments from the Securities and Exchange Commission:
United States Securities and Exchange Commission:
Division of Corporation Finance:
Washington, D.C. 20549:
June 22, 2012:
Michael Courts:
Acting Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Courts:
Thank you for the opportunity to review the Government Accountability
Office's (GAO) draft report concerning the Conflict Minerals provision
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Act). The SEC staff is separately providing you with technical
comments on the draft report.
GAO prepared the draft report in response to the requirement in
Section 1502 of the Act. In addition to requiring the SEC to issue
rules, Section 1502 of the Act requires that not later than two years
after enactment of the Act and annually thereafter, the GAO submit a
report to Congress assessing the effectiveness of Exchange Act Section
13(p) as added by Section 1502(b), a description of issues encountered
by the SEC in carrying out the provisions of Section 13(p), and a
review of non-covered companies that have conflict minerals necessary
to the functionality or production of a product manufactured by such
companies. Section 1502 also requires the GAO to submit annually a
report that includes an assessment of the rate of sexual-and gender-
based violence in war-tom areas of the Democratic Republic of the
Congo and adjoining countries. We understand that in light of the fact
no final rule has been promulgated, the GAO report examines the steps
the SEC has taken toward issuing a conflict minerals disclosure rule;
stakeholder-developed initiatives that may help covered companies
comply with the anticipated rule; and any additional information
available on the rate of sexual violence in the eastern Democratic
Republic of Congo.
We appreciate that the GAO acknowledged in the report the uniqueness
of this rulemaking as well as all the steps the Commission and its
staff have taken including extending and reopening the comment period
and holding a roundtable, all at the request of stakeholders, along
with scores of meetings with various stakeholders.
The draft GAO report recommends that if the SEC does not meet its June
2012 target issuance date, the SEC identify the remaining steps it
needs to take and the associated timeframes to finalize and issue a
final conflict minerals disclosure rule. The report makes these
recommendations to remove uncertainty on what covered companies will
be required to do under a disclosure rule.
Since the Commission has issued a proposed rule, a final rule could be
adopted by a vote of a majority of the Commission, once any open
issues are resolved. As a five member Commission, the required steps
are subject to a determination by a majority of members, and
Commission deliberations on this matter are subject to the
requirements of the Government in the Sunshine Act. We also note that
describing any particular steps required to finalize the rule will not
remove uncertainty on what covered companies will be required to do
under a final rule since the actions required will only become clear
when a final rule is issued.
We appreciate the importance of completing this rulemaking and
providing certainty. Please be assured that we continue to endeavor to
do so expeditiously.
We appreciate the GAO's attention to this important issue and would
like to thank you and your staff for the opportunity to review the
GAO's draft report.
Sincerely,
Signed by:
Paula Dubberly:
Deputy Director:
Division of Corporation Finance:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Michael J. Courts, (202) 512-8980 or courtsm@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Godwin Agbara, Assistant
Director; Ian Ferguson; Amanda Bartine; Justin Fisher; Ernie Jackson;
Debbie Chung; Debra Johnson; Fang He; Etana Finkler; and Jeremy Sebest
made key contributions to this report.
[End of section]
Footnotes:
[1] GAO, The Democratic Republic of the Congo: U.S. Agencies Should
Take Further Actions to Contribute to the Effective Regulation and
Control of the Minerals Trade in Eastern Democratic Republic of the
Congo, [hyperlink, http://www.gao.gov/products/GAO-10-1030]
(Washington, D.C.: Sept. 30, 2010).
[2] The Act also allows the Secretary of State to name any other
mineral or its derivatives as a conflict mineral.
[3] While SEC has not issued a final rule, in its proposed rule it has
interpreted "persons" in section 1502(b) to apply only to issuers of
securities that file reports with SEC under section 13(a) or section
15(d) of the Securities Exchange Act of 1934, including domestic
companies, foreign private issuers, and smaller reporting companies.
See 75 Federal Register at 80951 (Dec. 23, 2010).
[4] In this report we are not reporting on the effectiveness of SEC's
conflict minerals disclosure rule, as required under the Act, because
SEC had not yet issued its final rule at the time of our audit. In the
interim, to meet our mandated reporting time frame of July 2012 under
the Act, we are reporting on steps SEC has taken toward issuing a rule
and on industry and other stakeholders' initiatives that may help
covered companies comply with the anticipated disclosure rule. We will
report on the effectiveness of SEC's final conflict minerals
disclosure rule after such a rule is issued and covered companies
submit their conflict minerals disclosure reports.
[5] As specified in our 2011 report, we will identify any additional
information available from eastern DRC and the neighboring countries
of Burundi, Rwanda, and Uganda.
[6] The countries adjoining the DRC are Angola, Zambia, Tanzania,
Burundi, Rwanda, Uganda, South Sudan, the Central African Republic,
and the Republic of the Congo.
[7] Section 1502(b) also requires that private sector audits of
conflict minerals reports submitted by covered companies to SEC be
conducted in accordance with standards established by the Comptroller
General of the United States. Before we started work on this report,
SEC officials contacted GAO to discuss GAO's audit standards and we
explained our audit standards to SEC.
[8] GAO, The Democratic Republic of the Congo: Information on the Rate
of Sexual Violence in War-Torn Eastern DRC and Adjoining Countries,
[hyperlink, http://www.gao.gov/products/GAO-11-702] (Washington, D.C.:
July 13, 2011).
[9] According to the 2012 State Department Background Notes, the
estimated population for the DRC is 71.7 million, while the 2012 CIA
World Factbook estimates DRC's population at 73.6 million.
[10] This number is based on an estimate by the International Rescue
Committee, which conducted a series of population-based surveys to
determine the conflict-related mortality rate in the DRC. Although we
did not evaluate these studies, it should be noted that the challenges
and limitations that exist generally for population-based surveys are
relevant to this series of surveys and resulting estimates.
[11] Pub. L. No. 109-456, sec.102(14).
[12] Section 1502(b) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203, 124 stat. 1376 at 2213-2218,
added section 13(p) to the Securities Exchange Act of 1934, 15 U.S.C.
§ 78m(p).
[13] From its creation in 1999 to July 2010, the United Nations'
deployment was called the United Nations Organization Mission in the
Democratic Republic of the Congo. On July 1, 2010, the deployment's
name was changed to the United Nations Organization Stabilization
Mission in the Democratic Republic of the Congo.
[14] PPA intends to demonstrate that it is possible to secure conflict-
free minerals from the DRC and neighboring countries. PPA issued its
request for proposals on June 15, 2012 and it expects to award up to
$800,000 in two or more grants to support the goals of the alliance.
[15] To the extent that mined minerals are misreported and/or smuggled
out of the DRC, these estimates could be incorrect.
[16] UNGoE, Letter dated 29 November 2011 from the Chair of the
Security Council Committee established pursuant to resolution 1533
(2004) concerning the Democratic Republic of the Congo addressed to
the President of the Security Council. S/2011 (S/738). Official
Record. New York, 2011.
[17] According to an USAID official, as of late 2011 all exporters
from the DRC must process their minerals to a 60 percent mineral
content level, which increases the value added for the DRC.
[18] For example, tin solder is used to attach individual components
on circuit boards.
[19] Tantalum is also used to produce alloy additives, which can be
found in turbines in jet engines; mill and chemical products; thin
films, which are used in semiconductors; and other products.
[20] We note, however, that the supply chain for each conflict mineral
is distinct. In particular, according to gold industry
representatives, the supply chain for gold is significantly different
from the supply chains for tin, tantalum, and tungsten because of the
following factors: (1) the role of bullion banks in the gold supply
chain; (2) the role of gold in investment markets; (3) the high level
of recycled gold utilized in the gold supply chain; (4) the
portability and high value of small amounts of gold; (5) the role of
gold as a currency and a store of value; and (6) the ease with which
gold can be refined.
[21] In contrast to mechanized industrial mining, artisanal mining is
a form of mining that is characterized by a lack of mechanization or
capital investment.
[22] According to a December 2011 UNGoE report, Banro, a Canadian-
based mining company, began operating the first industrial gold mine
in South Kivu in October 2011. In addition, according to a gold
industry representative, it is anticipated that other industrial gold
mining companies will invest in industrial mining operations in DRC by
2015.
[23] In this report, the term "smelter" refers to those facilities
that process or refine columbite-tantalite (coltan), cassiterite, or
wolframite ores and/or recycled materials into high-purity tantalum,
tin, and tungsten, respectively. The term "refiner" refers to those
facilities that process mined and recycled gold into high-grade gold.
[24] Original equipment manufacturers may also sell their products to
retailers or distributers, who in turn sell the products to final end-
user consumers.
[25] Companies operating in the first four phases of the supply chain
are typically referred to as "upstream companies," while those
companies operating in the remaining phases are referred to as
"downstream companies." Most U.S. companies that may be affected by
section 1502(b) of the Dodd-Frank Act are generally downstream
companies.
[26] Examples of other issues on which the proposed rule requests
feedback from the public include whether the proposed rule would
present undue costs to smaller companies; whether to prescribe the
type of due diligence required; and how to handle existing stockpiles
of conflict minerals or minerals from recycled or scrap sources.
[27] As stated earlier in this report, before we started work on this
report, SEC officials contacted GAO to discuss GAO's audit standards
and we explained our audit standards to SEC.
[28] This number is as of April 20, 2012 and counts distinct comment
letters posted to SEC's website. "Form" comment letters with identical
content--but sent from different individuals--are counted as a single,
distinct comment letter submitted to and posted by SEC.
[29] This number is as of April 20, 2012 and counts individual
memorandums on meetings held with SEC officials which were posted to
SEC's website.
[30] The Commission consists of five presidentially-appointed
Commissioners, with staggered five-year terms. One of them is
designated by the President as Chairman of the Commission--the
agency's chief executive. It is the responsibility of the Commission
to: (1) interpret federal securities law; (2) issue new rules and
amend existing rules; (3) oversee the inspection of securities firms,
brokers, investment advisors, and ratings agencies; (4) oversee
private regulatory organizations in the securities, accounting, and
auditing fields; and (5) coordinate U.S. securities regulation with
federal, state, and foreign authorities.
[31] According to SEC, pursuant to the provisions of the Government in
the Sunshine Act, Pub. L. No. 94-409, SEC will hold an open meeting in
which the Commission will discuss this and other rules.
[32] According to industry association and company representatives,
the anticipated disclosure rule could impact any U.S. or foreign
company that is a supplier to those covered companies that produce
products containing conflict minerals, because covered companies
required to disclose the use of conflict minerals in their products
will need to obtain conflict minerals sourcing information from their
suppliers. Consequently, U.S. and foreign companies across the
conflict minerals supply chains may also need to conduct due diligence
and trace their supply chains to provide sourcing information to
covered companies. Hence, many of the initiatives may help both
covered companies comply with the anticipated disclosure rule and may
help U.S. and foreign suppliers meet the information needs of their
customers, which may be covered companies.
[33] According to State, other factors have also impacted the progress
of eastern DRC-centered initiatives, including the DRC government's
September 2010-March 2011 mining ban in eastern DRC and on-going
security challenges throughout the Kivu provinces. State also noted
that, while the issuance of SEC's final rule will have a significant
impact in clarifying what is expected of covered companies, some
challenges for implementing initiatives will still exist even after a
final rule is issued; in particular, the development of initiatives to
support the traceability of minerals along the supply chain will
require continued progress once SEC's final rule is issued.
[34] OECD furnishes the following definition of due diligence: "Due
diligence is an on-going, proactive and reactive process through which
companies can ensure that they respect human rights and do not
contribute to conflict. Due diligence can also help companies ensure
they observe international law and comply with domestic laws,
including those governing the illicit trade in minerals and United
Nations sanctions. Risk-based due diligence refers to the steps
companies should take to identify and address actual or potential
risks in order to prevent or mitigate adverse impacts associated with
their activities or sourcing decisions."
[35] Chain of custody refers to the paper trail that documents the
sequence of entities that have custody of minerals as they move
through a supply chain.
[36] The initiative's traceability and due diligence program uses
uniquely numbered tags to trace mineral shipments from the mine of
origin to the smelter, which allows companies to confirm the actual
source and trading chain of the minerals they purchase.
[37] As previously noted, companies that can trace their supply chains
to a smelter certified through the Conflict-Free Smelter Program can
claim that the minerals in their products are conflict-free.
[38] As of July 2012, 12 companies that represent 18 tantalum smelters
had been certified as conflict-free through the Conflict-Free Smelter
Program. A list of conflict-free smelters can be viewed on the CFS
Program website, accessed July 5, 2012, at [hyperlink,
http://www.conflictfreesmelter.org/CFSindicators.htm].
[39] As we reported in 2010, U.S. and foreign officials and others
said that lack of security, weak governance, and lack of
infrastructure in eastern DRC are significant challenges that impede
efforts to control the conflict minerals trade in eastern DRC. The
most recent reports by UNGoE and Global Witness have confirmed that
these challenges remain.
[40] The report, which was released in February 2012, shows that the
main perpetrator of sexual violence is often a current or former
partner of the victim.
[41] DHS is largely supported by USAID and is conducted in over 90
countries.
[42] One of the researchers associated with the McGill study
emphasized that, even if funding was currently available, a follow-up
survey would not be scheduled to be conducted until 2013 (at the
earliest) because yearly analysis on the rate of sexual violence in
eastern DRC does not, by itself, provide much relevant data. According
to this researcher, a follow-up survey timed to assess the impact of
specific programming on the ground would provide more relevant data
(in this case, conducting a follow-up survey after grants to NGOs to
conduct sexual violence education and outreach activities in eastern
DRC is scheduled to be completed in 2013).
[43] In this report we are not reporting on the effectiveness of SEC's
conflict minerals disclosure rule, as required under the Act, because
SEC had not yet issued its final rule at the time of our audit. In the
interim, to meet our mandated reporting time frame of July 2012 under
the Act, we are reporting on steps SEC has taken toward issuing a rule
and on industry and other stakeholders' initiatives that may help
covered companies comply with the anticipated disclosure rule.
[44] [hyperlink, http://www.gao.gov/products/GAO-11-702].
[45] The G-8 nations include the United States, United Kingdom,
France, Germany, Italy, Japan, Canada, and Russia.
[46] The OECD Due Diligence Guidance recommends the immediate
suspension of trade with suppliers linked to any party either
committing serious human rights abuses or supporting non-state armed
groups; in contrast, to continue to support sourcing from the conflict-
affected country, the guidance recommends the adoption of a risk
management plan, rather than suspension of trade, to prevent direct or
indirect support to public or private security forces when those
entities are present at mining sites.
[47] According to representatives of the OECD Secretariat, OECD staff,
in consultation with various stakeholders, identified similarities
between the tin, tantalum, and tungsten supply chains, and identified
significant differences between these supply chains and the supply
chain for gold. In addition, they identified distinct challenges to
conducting due diligence for the tin, tantalum, and tungsten supply
chains versus the supply chain for gold. Hence, OECD developed one
supplement for tin, tantalum, and tungsten and a separate supplement
for gold. However, Annex I of the OECD Due Diligence Guidance applies
to the tin, tantalum, tungsten and gold supply chains and both
supplements maintain the same five-step framework. The Supplement for
Tin, Tantalum, and Tungsten was adopted by the OECD Council in May
2011; the Supplement on Gold will be reviewed by the OECD Council in
July 2012.
[48] According to a representative from the OECD Secretariat, the
changing attitudes in the DRC can also be attributed to (1) the
emerging demand for minerals from Central Africa that are conflict-
free and (2) the steps the DRC government is taking to integrate the
OECD Due Diligence Guidance into and to monitor implementation of the
guidance. For example, in May 2012 the government of the DRC suspended
two Chinese-owned trading companies' export licenses for failing to
carry out due diligence over their operations in North Kivu.
[49] GeSI and EICC representatives began designing the concept for a
smelter validation program in 2009. In April 2010, GeSI and EICC
representatives presented the proposal for the Conflict-Free Smelter
Program and the audit protocol for tantalum smelters.
[50] GeSI and the EICC also released the Conflict Minerals Reporting
Template to standardize the collection of information from suppliers.
This tool may reduce the burden on suppliers that may receive numerous
requests for information from different customers. The template may be
used by covered companies to help (1) trace their conflict minerals
supply chains and (2) collect sourcing information for conflict
minerals used in their products. GeSI and the EICC developed another
tool, the Dashboard, to aggregate the responses companies receive from
suppliers.
[51] To be compliant with the audit protocols, smelters must be able
to demonstrate that they have (1) a conflict minerals policy, (2) a
mechanism for tracing goods sold back to the purchased material
source, and (3) documentation verifying that the conflict minerals are
from non-conflict sources.
[52] A list of conflict-free smelters can be viewed on the CFS Program
website, accessed July 5, 2012, at [hyperlink,
http://www.conflictfreesmelter.org/CFSindicators.htm].
[53] According to the OECD Due Diligence Guidance, the individual
company must exercise judgment to determine if conflict exists in the
country in which it conducts business. According to WGC
representatives, WGC took steps to help mining companies avoid
pressure from host governments that may be averse to being designated
as "conflict-affected or high risk" by an individual mining company by
including a requirement in the standard that a mining company rely on
external sources--such as sanctions or reports from authoritative NGOs-
-to determine if conflict exists.
[54] LBMA is the overseer for the London Good Delivery List, a list of
63 accredited gold refiners that meet a specific standard for the
quality of their refined gold and silver bars. According to LBMA
representatives, most banks and exchanges will only contract with
refiners on the Good Delivery List.
[55] The LBMA also incorporated existing anti-money laundering and
"know your customer" due diligence practices into the Responsible Gold
Guidance.
[56] The program was also launched to help its member companies
identify and track the supply chains of other precious metals, such as
platinum, palladium, and rhodium.
[57] As mentioned previously, chain of custody refers to the paper
trail that documents the sequence of entities that have custody of
minerals as they move through a supply chain.
[58] RJC defines grandfathered gold as existing stocks of gold that
existed before the chain-of-custody standard came into effect, with a
reliable record demonstrating its date of ownership, extraction and/or
manufacture. Grandfathered gold may be in the form of bars, ingots,
coins, or similar, or within a sealed container (e.g., grain, powder,
or sponge), with the refining date either permanently shown with the
mark of a refiner or government mint; or verified by the refiner in
accordance with a serial number or other permanent physical mark or
characteristic; or determined though bank depository or inventory
records.
[59] According to a NGO representative, in addition to improving due
diligence and transparency within the tin, tantalum, and tungsten
supply chains, the initiative is enabling the government of the DRC to
legitimately collect taxes.
[60] Compared to eastern DRC, Katanga is relatively conflict-free. As
of June 2012, ITRI and its partners had not extended the ITRI
initiative to eastern DRC, where conflict and violence persist.
[61] The standards are aligned with the OECD Due Diligence Guidance.
In addition, according to a BGR representative, the DRC government
incorporated the standards in national legislation and the Rwandan
government included the standards in a national guidance document; the
standards are obligatory in DRC and voluntary in Rwanda.
[62] According to a BGR representative, BGR supports the process while
the partner actually certifies the mine sites.
[63] The DRC's national certification system, the Certification
Nationale, will enable the government to implement ICGRL's regional
certification mechanism.
[64] Cadastre Minier--an office within the DRC Ministry of Mines--and
the International Peace Information Service will conduct a
comprehensive mine site qualification and cartography initiative
throughout eastern DRC. In addition, MONUSCO is working with the DRC
government on the Centres de Négoce initiative, an effort to establish
five mineral trading centers in North and South Kivu. The project was
launched in 2009 with the goal of creating choke-points where
traceability procedures could be properly applied and where tin,
tantalum, tungsten, and gold could be sold, bought, analyzed, and
taxed. As of November 2011, MONUSCO completed construction of four of
the centers and established a validation process to ensure that only
conflict-free minerals will be traded at the centers.
[65] According to BGR representatives, the mine site validation teams
will visit and conduct qualification reviews at additional mines in
North and South Kivu in the coming months and the validation of mine
sites in Maniema and Katanga will being in July 2012.
[66] The ICGLR developed the following six tools: regional
certification mechanism, harmonization of national legislation,
regional database on mineral flows, formalization of the artisanal
mining sector, promotion of the Extractive Industry Transparency
Initiative, and a whistle-blowing mechanism.
[67] According to the International Peace Information Service, a
ministerial decree has been finalized that would integrate the
regional certification mechanism into Rwanda's mining code, and it is
now pending approval by the Rwandan Ministry of Mines. Certification
of mines will begin after the Rwandan Ministry of Mines approves the
decree.
[End of section]
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